Synthesis document

Synthesis document Part 3 The SIS strategic framework and key elements of the proposed Strategy 10 Building livelihood security, developing enterprises and providing technical support 10.4 Providing market scoping and access support 10.4.4 Access to credit

While the need for collateral to secure loans is important, so is the ability to repay a loan. There is an enormous problem with repayment of loans due to low returns (linked in part to poor farm management but also to the high-risk nature of agriculture in general) and to the pressing need of many group members for a cash payout at the end of the year. As discussed above, access to credit for people engaging in enterprises on land that is held by a group or community is notoriously difficult. In many of the high-value initiatives in land reform, mechanisms are being found to address the requirements of development finance institutions, and such enterprises are obtaining access to credit (as evidenced in share equity schemes and initiatives where strategic partners are involved). These include developing appropriate institutional arrangements for access to credit and to attract investment, including unitised trusts. At the lower end of the market, however, there are limited options. Access to such credit is provided by small-scale facilities and the Micro Agricultural Financial Institution of South Africa (MAFISA), which is an NDA facility administered by the Land Bank. According to Umhlaba Rural Services, the Land Bank has currently capped the facility at R25 000 and ‘is acting as a poor custodian of the funding by reluctantly distributing it and not making emerging farmers aware of the funding' (URS 2006:6). What this means is that there are currently limited opportunities for small-scale access to credit.